UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended September 30, 2002

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the Transition Period from _____ to ______

                         Commission file number 0-24532

                           FLAG FINANCIAL CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        Georgia                                         58-2094179
--------------------------------------------------------------------------------
(State of incorporation)                 (I.R.S. Employer Identification No.)

                                  P.O. Box 3007
                             LaGrange, Georgia 30241
--------------------------------------------------------------------------------
              (Address of principal executive offices) (Zip Code)

                                 (706) 845-5000
--------------------------------------------------------------------------------
                               (Telephone Number)

     Indicate  by check mark  whether the  registrant  has (1) filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                   YES [X] NO

             Common stock, par value $1 per share: 8,386,365 shares
                       Outstanding as of November 8, 2002





FLAG Financial Corporation and Subsidiaries




----------------------------------------------------------------------------------------
                                Table of Contents

                                                                                   Page
                                                                                 
PART I Financial Information

  Item 1.  Financial Statements

              Consolidated Balance Sheets at September 30, 2002 and
               December 31, 2001 and September 30, 2001............................  3

             Consolidated Statements of Operations for the Nine months and
              Quarters Ended September 30, 2002 and 2001...........................  4

             Consolidated Statements of Comprehensive Income for the
               Nine months and Quarters Ended September 30, 2002 and 2001..........  5

             Consolidated Statements of Cash Flows for the Nine months
              Ended September 30, 2002 and 2001....................................  6


             Notes to Consolidated Financial Statements............................  7

  Item 2.  Management's Discussion and Analysis of Financial Condition
               And Results of Operations...........................................  8

  Item 3.  Market Risk Information................................................. 15

  Item 4.   Controls and Procedures................................................ 15


PART II  Other Information

  Item 1.  Legal Proceedings....................................................... 16

  Item 2.  Changes in Securities................................................... 16

  Item 3.  Defaults Upon Senior Securities......................................... 16

  Item 4.  Submission of Matters to a Vote of Security Holders..................... 16

  Item 5.  Other Information....................................................... 16

  Item 6.  Exhibits and Reports on Form 8-K........................................ 16


                                       2



Part I. Financial Information
Item 1. Financial Statements
FLAG Financial Corporation and Subsidiaries
Consolidated Balance Sheets



                                                                      September 30,     December 31,    September 30,
                                                                         2002              2001             2001
                                                                    -------------------------------------------------
                                                                      (UNAUDITED)        (AUDITED)        (UNAUDITED)
ASSETS
------
                                                                                                  
Cash and due from banks ........................................    $  12,401,953        20,077,641        16,418,896
Federal funds sold .............................................               --                --         6,038,000
                                                                    -------------------------------------------------

    Total cash and cash equivalents ............................       12,401,953        20,077,641        22,456,896
                                                                    -------------------------------------------------
Interest-bearing deposits ......................................             --             160,093            59,756
Investment securities available-for-sale .......................      118,096,869       131,526,473       126,552,151
Other investments ..............................................        7,142,682         5,835,093         5,835,093
Mortgage loans held-for-sale ...................................        7,561,919         6,454,127         4,414,300
Loans, net .....................................................      376,582,848       368,967,089       368,044,332
Premises and equipment, net ....................................       13,171,474        13,943,542        13,910,499
Accrued interest receivable ....................................        4,451,006         4,778,443         6,038,216
Other assets ...................................................       19,383,763        18,459,400        19,433,223
                                                                    -------------------------------------------------
               Total assets ....................................    $ 558,792,514       570,201,901       566,744,466
                                                                    =================================================

LIABILITIES

Non interest-bearing deposits ..................................    $  39,347,937        48,553,710        45,882,443
Interest-bearing demand deposits ...............................      126,039,129       119,985,564       114,302,408
Savings ........................................................       25,401,806        24,248,553        25,127,983
Time ...........................................................      232,300,619       247,793,498       270,650,410
                                                                    -------------------------------------------------
   Total deposits ..............................................      423,089,491       440,581,325       455,963,244
                                                                    -------------------------------------------------
Federal funds purchased and repurchase agreements ..............        5,703,000        18,001,000           865,071
Other borrowings ...............................................             --           5,000,000         3,250,000
Advances from Federal Home Loan Bank ...........................       62,000,000        39,448,435        40,558,518
Accrued expenses and other liabilities .........................        7,752,575        13,147,654         9,955,632
                                                                    -------------------------------------------------
                Total liabilities ..............................      498,545,066       516,178,414       510,592,465
                                                                    -------------------------------------------------

STOCKHOLDERS' EQUITY

Preferred stock (10,000,000 shares authorized, none
     issued and outstanding) ...................................               --                --                --
Common stock ($1 par value, 20,000,000 shares authorized,
     9,631,451,  8,277,995 and 8,277,995 shares issued at
     September 30, 2002, December 31, 2001 and
     September 30, 2001, respectively ..........................        9,631,451         8,277,995         8,277,995
Additional paid-in capital .....................................       23,426,500        11,354,511        11,354,511
Retained earnings ..............................................       34,185,472        39,223,132        39,062,697
Accumulated other comprehensive income .........................        2,471,535         1,612,488         2,167,244
Less: Treasury stock at cost; 1,236,961 shares at September 30,
    2002, 908,001 shares at December 31, 2001 and 692,607 shares
    at September 30, 2001, respectively ........................       (9,467,510)       (6,444,639)       (4,710,446)
                                                                    -------------------------------------------------
                  Total stockholders' equity ...................       60,247,448        54,023,487        56,152,001
                                                                    -------------------------------------------------
                  Total liabilities and stockholders' equity ...    $ 558,792,514       570,201,901       566,744,466
                                                                    =================================================




      See Accompanying Notes to Consolidated Financial Statements


                                       3






Consolidated Statements of Operations

------------------------------------------------------------------------------------------------------------------------------------

                                                                                                   (UNAUDITED)
                                                                               Three Months Ended               Nine months Ended
                                                                                  September 30,                   September 30,
                                                                           ---------------------------------------------------------
                                                                                2002           2001          2002              2001
                                                                                                              
Interest Income
            Interest and fees on loans ................................    $ 7,869,733      9,017,780     22,173,738      28,555,680
            Interest on securities ....................................      1,726,540      1,994,886      5,294,916       5,428,029
            Interest on time deposits and federal funds sold ..........         14,705        105,678         88,575         539,407
                                                                           ---------------------------------------------------------
                  Total interest income ...............................      9,610,978     11,118,344     27,557,229      34,523,116
                                                                           ---------------------------------------------------------
Interest Expense
            Interest on deposits:
               Interest Bearing Demand Deposits .......................        487,950        586,978      1,489,478       1,914,476
               Savings Deposits .......................................         56,102         75,172        165,768         309,699
               Time Deposits ..........................................      2,026,869      3,778,473      6,857,305      11,888,945
            Other .....................................................        295,143        660,486        880,906       1,657,400
                                                                           ---------------------------------------------------------
                  Total interest expense ..............................      2,866,064      5,101,109      9,393,457      15,770,520
                                                                           ---------------------------------------------------------
                  Net interest income before provision for loan losses       6,744,914      6,017,235     18,163,772      18,752,596
Provision for Loan Losses .............................................        195,000         84,000      4,399,000         588,000
                                                                           ---------------------------------------------------------
                  Net interest income after provision for loan losses .      6,549,914      5,933,235     13,764,772      18,164,596
                                                                           ---------------------------------------------------------
Other Income
           Service charges on deposit accounts ........................        848,151        977,356      2,529,494       2,947,925
            Mortgage loan and related fees ............................        808,334        588,816      1,862,331       1,676,920
            Insurance commissions and brokerage fees ..................        182,685        175,860        429,418         486,179
            Other income ..............................................        145,203        188,879        531,994         330,714
                                                                           ---------------------------------------------------------
                  Total other income ..................................      1,984,373      1,930,911      5,353,237       5,441,738
                                                                           ---------------------------------------------------------

Other Expenses
            Salaries and employee benefits ............................      3,989,371      3,389,703     14,767,480      10,312,159
            Occupancy .................................................        876,378        863,082      2,767,502       2,663,404
            Professional fees .........................................        165,790        254,501      1,574,797         814,743
            Postage, printing and supplies ............................        220,347        121,987        762,613         642,057
            Amortization of intangibles ...............................        126,367        124,322        385,911         372,966
            Communications and data ...................................        484,814        561,703      1,611,714       1,541,296
            Other operating ...........................................        706,050        944,919      3,160,412       2,609,248
                                                                           ---------------------------------------------------------
                  Total other expenses ................................      6,569,117      6,260,217     25,030,429      18,955,873
                                                                           ---------------------------------------------------------

                  Earnings (loss) before provision for
                     Income taxes and extraordinary item ..............      1,965,170      1,603,929     (5,912,420)      4,650,461
            Provision for income taxes ................................        607,414        437,957     (2,541,295)      1,243,233
                                                                           ---------------------------------------------------------
                  Earnings (loss) before extraordinary item ...........      1,357,756      1,165,972     (3,371,125)      3,407,228
            Extraordinary item - loss on  redemption of debt, net of
                   income tax benefit of $101,377 in 2002 .............             --             --        165,404              --
                                                                           ---------------------------------------------------------
                  Net earnings (loss) ................................     $ 1,357,756      1,165,972     (3,536,529)      3,407,228
                                                                           =========================================================

            Basic earnings (loss) per share before extraordinary item .    $      0.16           0.15          (0.41)           0.43
            Extraordinary item ........................................             --             --          (0.02)             --
                                                                           ---------------------------------------------------------
            Basic earnings (loss) per share ...........................    $      0.16           0.15          (0.43)           0.43
                                                                           =========================================================


            Diluted earnings (loss) per share before extraordinary item    $      0.16           0.15          (0.41)           0.43
            Extraordinary item ........................................             --             --          (0.02)             --
                                                                           ---------------------------------------------------------
            Diluted earnings (loss) per share .........................    $      0.16           0.15          (0.43)           0.43
                                                                           =========================================================



            See Accompanying Notes to Consolidated Financial Statements.

                                       4







Consolidated Statements of Comprehensive Income

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                  (UNAUDITED)
                                                                                Three Months Ended          Nine months Ended
                                                                                  September 30,              September 30,
                                                                            -------------------------------------------------------
                                                                               2002           2001         2002          2001
                                                                            -------------------------------------------------------
                                                                                                            
Net earnings (loss) ......................................................  $ 1,357,756     1,165,972    (3,536,529)    3,407,228
Other comprehensive income, net of tax:
    Unrealized gains on investment
      securities available-for-sale:
       Unrealized gains arising during the period,
         net of tax of $179,619, $500,936, $659,785 and
         $1,463,021, respectively ........................................      293,063       817,317     1,076,491     2,387,035
       Plus:  Reclassification adjustment for losses included in net
        earnings (loss), net of tax of $4,240.............................           --            --         6,917            --
     Unrealized (losses) gains on cash flow hedges, net of tax of $45,837,
         $270,589, $137,512 and $28,026 respectively .....................      (74,787)     (441,487)     (224,361)       45,726
                                                                            -----------     ---------    ----------     ---------

Other comprehensive income ...............................................      218,276       375,830       859,047     2,432,761
                                                                            -----------     ---------    ----------     ---------
Comprehensive income (loss) ..............................................  $ 1,576,032     1,541,802    (2,677,482)    5,839,989
                                                                            ===========     =========    ==========     =========



See Accompanying Notes to Consolidated Financial Statements

                                        5





Consolidated Statements of Cash Flows

----------------------------------------------------------------------------------------------------------------------
                                                                                            Nine months Ended
                                                                                              September 30,
                                                                                     ---------------------------------
                                                                                         2002               2001
                                                                                               (UNAUDITED)
                                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (loss) earnings .......................................................      $ (3,536,529)      $  3,407,228
     Adjustment to reconcile net (loss) earnings to net
        cash provided by (used in) operating activities:
             Depreciation, amortization and accretion ..........................         1,911,350          2,099,121
             Provision for loan losses .........................................         4,399,000            588,000
             Loss on sale of available-for-sale securities .....................            11,157
             Gain on sales of loans ............................................        (1,016,539)          (759,096)
             Gain on sale of other real estate .................................           (56,639)           (64,658)
             Change in:
                    Mortgage loans-held-for sale ...............................           (91,253)           465,455
                    Other ......................................................        (7,829,338)        (1,930,467)
                                                                                     ---------------------------------
                       Net cash provided by (used in) operating activities .....        (6,208,791)         3,805,583
                                                                                     ---------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Net change in interest-bearing deposits ...................................           160,093          3,391,684
     Proceeds from sales and maturities of investment
         securities available-for-sale .........................................        53,921,872         23,381,350
     Purchases of investment securities available-for-sale .....................       (39,355,680)       (45,066,491)
     Purchases of other investments ............................................        (1,113,700)          (733,350)
     Net change in loans .......................................................       (12,014,759)        16,029,003
     Proceeds from sale of other real estate ...................................         1,271,452            735,029
     Proceeds from sale of premises and equipment ..............................           430,763             34,066
     Purchases of premises and equipment .......................................        (1,297,089)          (750,775)
     Purchases of cash surrender value life insurance ..........................          (133,023)          (120,793)
                                                                                     ---------------------------------
                     Net cash provided by (used in) investing activities........         1,869,929         (3,100,277)
                                                                                     ---------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net change in deposits ....................................................       (17,491,834)        (5,473,724)
     Change in federal funds purchased and repurchase agreements ...............       (12,298,000)           203,589
     Change in other borrowed funds ............................................        (5,000,000)         1,750,000
     Proceeds from FHLB advances ...............................................        46,000,000         10,000,000
     Payments of FHLB advances .................................................       (23,448,435)        (1,414,786)
     Purchase of treasury stock ................................................        (3,022,872)        (3,782,367)
     Proceeds from issuance of stock ...........................................        11,707,740                 --
     Proceeds from exercise of stock options ...................................           481,705              8,995
     Proceeds from issuance of warrants ........................................         1,236,000
     Cash dividends paid .......................................................        (1,501,130)        (1,413,227)
                                                                                     ---------------------------------
                    Net cash used in financing activities ......................        (3,336,826)          (121,520)
                                                                                     ---------------------------------

                      Net change in cash and cash equivalents ..................        (7,765,688)           583,786
     Cash and cash equivalents at beginning of period ..........................        20,077,641         21,873,110
                                                                                     ---------------------------------

    Cash and cash equivalents at end of period .................................      $ 12,401,953       $ 22,456,896
                                                                                      ================================


See Accompanying Notes to Consolidated Financial Statements


                                        6




Notes to Consolidated Financial Statements

--------------------------------------------------------------------------------

The accompanying  consolidated  financial  statements have not been audited. The
results  of  operations  are  not  necessarily  indicative  of  the  results  of
operations for the full year or any other interim periods.

The accounting  principles followed by FLAG Financial  Corporation  ("FLAG") and
its bank  subsidiary and the methods of applying these  principles  conform with
accounting  principles  generally  accepted in the United  States of America and
with general practices within the banking industry.  Certain  principles,  which
significantly  affect  the  determination  of  financial  position,  results  of
operations,  and cash flows are summarized  below and in FLAG's annual report on
Form 10-K for the year ended December 31, 2001.

Note 1.  Basis of Presentation

The  consolidated  financial  statements  include  the  accounts of FLAG and its
wholly  owned  subsidiary,   FLAG  Bank  (Vienna,   Georgia).   All  significant
inter-company accounts and transactions have been eliminated in consolidation.

The  consolidated   financial   information   furnished  herein  represents  all
adjustments that are, in the opinion of management,  necessary to present a fair
statement of the results of operations,  and financial  position for the periods
covered herein and are normal and recurring in nature. For further  information,
refer to the consolidated  financial statements and footnotes included in FLAG's
annual report on Form 10-K for the year ended December 31, 2001.

 Note 2.  Earnings Per Share

Net earnings (loss) per common share are based on the weighted average number of
common  shares  outstanding  during each period.  The  calculation  of basic and
diluted earnings (loss) per share is as follows:




                                                            Three Months Ended                  Nine months Ended
                                                               September 30,                     September 30,
                                                       ---------------------------------------------------------------
                                                           2002             2001              2002            2001
                                                       ---------------------------------------------------------------
                                                                                              
     Basic earnings (loss) per share:
     Net earnings (loss) after extraordinary item       $1,357,756       $1,165,972       $(3,536,529)    $3,407,228
     Weighted average common shares
         outstanding ............................        8,393,364        7,768,959         8,136,955      7,923,701
     Per share amount ...........................       $     0.16       $     0.15       $     (0.43)    $     0.43

     Diluted earnings (loss) per share:
     Net earnings (loss) ........................       $1,357,756       $1,165,972       $(3,536,529)    $3,407,228
     Effect of dilutive securities -
         stock options ..........................          252,268           48,852                --         28,213
     Per share amount ...........................       $     0.16       $     0.15       $     (0.43)    $     0.43



                                       7



Item 2:  Management's Discussion and Analysis of
         Financial Condition and Results of Operations
--------------------------------------------------------------------------------


Forward-Looking Statements

The  following is a discussion  of our  financial  condition as of September 30,
2002  compared to December  31, 2001 and the results of our  operations  for the
quarter and nine months  ended  September  30, 2002  compared to the quarter and
nine  months  ended  September  30,  2001.  These  comments  should  be  read in
conjunction  with  our  consolidated   financial   statements  and  accompanying
footnotes  appearing  in this  report.  This  report  contains  "forward-looking
statements" relating to, without limitation, future economic performance,  plans
and objectives of management for future operations,  and projections of revenues
and other financial  items that are based on the beliefs of our  management,  as
well  as  assumptions  made  by  and  information  currently  available  to  our
management. The words "expect", "estimate", "anticipate", and "believe", as well
as similar expressions, are intended to identify forward-looking statements. Our
actual  results  may  differ  materially  from  the  results  discussed  in  the
forward-looking  statements,  and our  operating  performance  each  quarter  is
subject to various  risks and  uncertainties.  Factors  that could cause  actual
results  to  differ  from  those  discussed  in the  forward-looking  statements
include, but are not limited to:

(1)   the strength of the U.S.  economy in general and the strength of the local
      economies in which operations are conducted;
(2)   the  effects of and changes in trade,  monetary  and fiscal  policies  and
      laws,  including  interest  rate policies of the Board of Governors of the
      Federal Reserve System;
(3)   inflation, interest rate, market and monetary fluctuations;
(4)   the timely  development of and acceptance of new products and services and
      perceived overall value of these products and services by users;
(5)   changes in consumer spending, borrowing and saving habits;
(6)   technological changes;
(7)   acquisitions;
(8)   the ability to increase market share and control expenses;
(9)   the  effect  of  changes  in laws  and  regulations  (including  laws  and
      regulations  concerning  taxes,  banking,  securities and insurance)  with
      which the Company and its subsidiary must comply;
(10)  the effect of changes in  accounting  policies  and  practices,  as may be
      adopted by the  regulatory  agencies as well as the  Financial  Accounting
      Standards Board;
(11)  changes in the Company's organization, compensation and benefit plans;
(12)  the costs and effects of litigation and of unexpected or adverse  outcomes
      in such litigation; and
(13)  the Company's success at managing the risks involved in the foregoing.


Forward-looking  statements speak only as of the date on which they are made. We
undertake  no  obligation  to update any  forward-looking  statement  to reflect
events or circumstances after the date on which the statement is made to reflect
the occurrence of unanticipated events.



                                       8



Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

Financial Condition

Assets and Funding

Total  assets were $558.8  million at  September  30,  2002, a decrease of $11.4
million or 2.0% from  December 31, 2001.  The Company has worked  during 2002 to
reduce the level of lower yielding  assets (loans and investment  securities) as
well as similar amounts of funding  identified as relatively  expensive (CDs and
fixed FHLB  advances).  Resulting from these efforts are lower levels of earning
assets and deposits  that are  producing  slightly  higher net interest  income.
While total assets reflected a decrease of $11.4 million,  earning assets during
the same period decreased only $3.6 million.

Gross loans  outstanding at September 30, 2002 were $383.9  million  compared to
$376.3 million at December 31, 2001. Loans outstanding, while up 2.0% over prior
year  amounts,  have just  recently  begun to grow.  The  Company's  efforts  at
reducing  lower  earning  and higher  risk  assets  during  2002  trimmed  loans
outstanding  to as low as  $344.9  million  during  the  second  quarter.  Loans
outstanding  at  September  30, 2002  represent  growth of  approximately  $46.5
million or 13.4% from the lower balances  experienced  during the second quarter
of 2002.

Investment securities at September 30, 2002 totaled $125.2 million versus $137.4
million at December 31, 2001. While the Company has reinvested some of the funds
that have  resulted  from  maturities  and sales during 2002, a portion of those
proceeds have been used to offset  decreases in certain  funding sources as well
as to fund loan growth.

Non-interest-bearing  deposits  have  decreased  by  $9.2  million  compared  to
December 31, 2001 levels.  This decrease is  attributable  to the divestiture of
two  branches in December  2001 as well as the closure of five  branches  during
2002. Interest bearing transaction  accounts have increased over the same period
by $11.7 million and largely  results from the  Company's  focus on this type of
funding as opposed to time deposits.  Time deposits have decreased substantially
over the same period, from $247.8 million at December 31, 2001 to $232.3 million
at September 30, 2002.

Liquidity and Capital Resources

The Company maintains borrowing lines with various other financial  institutions
including  the Federal Home Loan Bank.  At September  30, 2002,  the Company had
total borrowing  agreements of approximately $101 million of which approximately
$62.0 million was advanced.

The  Company's  Board of Directors  approved a private  placement of 1.3 million
shares of common stock and 1.3 million  warrants to purchase common stock during
the first quarter of 2002. At September 30, 2002, 1,272,000 shares and 1,272,000
warrants  to  purchase  common  stock  had been sold for an  aggregate  of $12.9
million.  All shares and warrants issued in the private placement were issued to
members of the  Company's  management  team and other  employees  under Rule 506
under the Securities Act of 1933, as amended.

The funds  provided  from the private  placement  contributed  to an increase of
11.5% in  stockholders'  equity to $60.2  million over December 31, 2001 levels.
The increase provided by the private placement funds was partially offset by the
net loss of $3.5  million and an increase  in  treasury  stock of $3.0  million.
Stockholders'  equity as a percentage of total assets was 10.8% at September 30,
2002 versus 9.5% at December 31, 2001.


                                       9


Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

Results of Operations

Overview of nine month period ending September 30, 2002

Net loss for the nine month period ending September 30, 2002 was $3.5 million or
$0.43 per share  compared  to net income of $3.4  million or $0.43 per share for
the  first  nine  months  of 2001.  The net loss in 2002  includes  an after tax
restructuring  charge of  $3,380,000,  a one-time  after tax  provision for loan
losses of $2,483,000,  and an after tax extraordinary charge of $165,000 related
to the  prepayment  of a  portion  of  the  Company's  Federal  Home  Loan  Bank
borrowings.

Net  interest  income for the nine months  ending  September  30, 2002 was $18.2
million,  a decrease  of  $600,000  or 3.1% from the same  period in 2001.  This
decrease is primarily  attributed to the significant  decrease in interest rates
as well as a slight contraction in earning assets during 2002.

Non-interest  income  for the  nine  month  period  ending  September  30,  2002
decreased 1.6% to $5.4 million when compared to the nine months ending September
30, 2001. While income from mortgage banking  activities  increased  $185,000 or
11.1% for the period, FLAG experienced a decrease in fees and service charges on
deposit  accounts of $418,000 or 14.2%.  This decrease was mainly  attributed to
FLAG's  decision to sell two branches in December  2001 with  approximately  $37
million in deposits.

Excluding the one-time  charges  mentioned  above, the Company would have earned
approximately  $2.5 million with  non-interest  expenses of approximately  $19.6
million for the nine month  period  ending  September  30,  2002.  This level of
non-interest  expenses  represents an increase of approximately  $600,000 and is
largely comprised of higher salaries and benefits.

Results of operations for quarter ending September 30, 2002

Net income for the quarter ended  September 30, 2002 was $1,358,000 or $0.16 per
diluted share. This level of net income represents an increase of 16.5% compared
to net income of $1,166,000 for the comparable period in 2001.  Diluted earnings
per share also increased from 2001 levels of $0.15 per share.

Net  interest  income  for the  quarter  ending  September  30,  2002  increased
approximately  $728,000 or 12.1% over the comparable  quarter in 2001. For these
periods,  net  interest  margin  increased  to 5.30%  from  4.63%.  The  Company
attributes most of the decrease in interest  income and interest  expense to the
lower rate  environment that has persisted during 2002. The decrease in interest
expense  has  been  more  significant  than the  decrease  in  interest  income,
resulting in increased net interest income.

Interest  income for the third quarter of 2002 was $9.6  million,  a decrease of
$1.5 million or 13.6% over the same quarter in 2001.  Interest and fees on loans
decreased from $9.0 million to $7.9 million,  a decrease of 12.7%.  FLAG's yield
on loans during the quarter  ended  September  30, 2002  decreased to 8.35% from
9.46% in the third quarter of 2001.  Average loans outstanding  during the third
quarter of 2002 were $374.0 million, a decrease of $4.1 million or 1.1% compared
to the  comparable  quarter a year ago.  At  September  30,  2002,  gross  loans
accounted for 68.7% of total assets and approximately  74.3% of interest earning
assets.  This compares favorably with the September 30, 2001 ratios of 66.1% and
73.2%, respectively.



                                      10


Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

Interest  income on  investment  securities  decreased  by  $268,000  during the
quarter  ending  September  30, 2002 to $1.7 million  when  compared to the same
quarter in 2001. The yield on the investment  portfolio  decreased from 5.86% to
5.24% over this period. For the quarters ended September 30, 2002 and 2001, FLAG
had  average  investment  securities  of  $129.6  million  and  $134.0  million,
respectively.

FLAG  aggressively  manages  earning  assets  in order to  maintain  a  balanced
combination  of credit and market  risk,  as well as yield.  In the current rate
environment,  FLAG has  attempted to maintain a very low level of federal  funds
sold,  relying on borrowing lines with other financial  institutions,  including
but not  limited  to the  FHLB.  During  the  third  quarter  of 2002,  FLAG was
successful  in averaging  only $1.3  million of federal  funds sold and interest
bearing  deposits  with other banks,  compared to $3.3 million  during the third
quarter of 2001.  Federal funds sold and interest-  bearing  deposits with other
banks averaged 0.25% and 0.64% of total interest earning assets for the quarters
ending September 30, 2002 and 2001, respectively.

FLAG uses customer deposits and borrowings from other financial  institutions as
its two primary sources to fund interest earning assets.  Total funding for FLAG
at September 30, 2002 was $490.8 million with an overall cost for the quarter of
2.36%,  compared to $500.6 million,  costing 4.10% in the comparable  quarter of
2001. The decreases in costs and balances  resulted in a savings of $2.2 million
or 43.8% for the quarter,  and allowed FLAG to improve total net interest income
with lower levels of interest earning assets.

Interest expense on customer deposits for the third quarter of 2002 decreased by
$1.9 million to $2.6 million when  compared to the quarter  ended  September 30,
2001. This 42% decrease was mainly attributable to aggressive  repricing efforts
on all  elements  of FLAG's  deposit  base.  Interest  bearing  demand  deposits
averaged  $126.7  million with an average  cost of 1.53% for the quarter  ending
September  30, 2002 compared to $108.6  million  costing an average of 2.15% for
the comparable quarter of 2001. Time deposits averaged $233.3 million and $266.7
million with average  costs of 3.45% and 5.62% for the third quarter of 2002 and
2001, respectively.

Interest  expense on other  borrowings  consists of  interest on FHLB  advances,
other  borrowings  and federal funds  purchased.  For the third quarter of 2002,
interest  expense on other  borrowings was  approximately  $295,000  compared to
$660,000 for the same quarter in 2001.  This  decrease of 55.3% is the result of
the early repayment and  refinancing of fixed FHLB advances in recent  quarters.
This refinancing  allowed FLAG to reduce the overall cost on other borrowings to
1.97% for the third quarter of 2002 compared to 5.25% a year ago.

Non-Interest Income and Expense

Non-interest  income grew 2.8% during the third  quarter of 2002 compared to the
same period in 2001. The decrease in  non-interest  bearing  balances  discussed
earlier  contributed  to a  decrease  in service  charges of 13.2% to  $848,000.
Income from mortgage banking activities (origination fees, gain on sale of loans
and service release  premiums) grew $220,000 to $808,000 in the third quarter of
2002,  mostly the result of very  favorable  interest  rates on home  mortgages.
Non-interest  income as a percent of total  revenue  decreased to 22.7% from the
2001 level of 24.3%.


                                       11


Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

Non-interest  expenses  increased during the quarter ended September 30, 2002 to
$6.6 million from $6.3 million in the same quarter of 2001.  This 4.9%  increase
includes a $13,000 increase in occupancy  expense,  a $239,000 decrease in other
operating  expense  and  a  $600,000  increase  in  salaries  and  benefits.   A
significant  portion of the increase in salaries and benefits is  attributed  to
increased commissions related to improved production in the mortgage,  insurance
and investment groups.

Income Taxes

Income tax expense  for the  quarter  ending  September  30,  2002 was  $607,000
compared to $438,000 for the same quarter in 2001. FLAG's effective tax rate for
the quarter ended September 30, 2002 was 30.9% compared to 27.3% for the quarter
ended September 30, 2001.

Loans

FLAG  engages  in a  full  complement  of  lending  activities,  including  real
estate-related,  commercial and financial loans and consumer  installment loans.
FLAG generally  concentrates lending efforts on real estate related loans. As of
September 30, 2002, FLAG's loan portfolio consisted of 84.3% real estate-related
loans,  11.1%  commercial  and financial  loans,  and 4.4% consumer  installment
loans. While risk of loss is primarily tied to the credit quality of the various
borrowers,  risk of loss may also  increase  due to  factors  beyond  the FLAG's
control,  such as local,  regional and/or national economic  downturns.  General
conditions  in the real estate  market may also impact the relative  risk in the
real estate portfolio. Of the target areas of lending activities, commercial and
financial  loans are  generally  considered  to have a greater risk of loss than
real estate loans or consumer installment loans.

Loans are stated at unpaid  balances,  net of unearned  income and deferred loan
fees.  Balances within the major loans receivable  categories are represented in
the following table: (000's omitted)




                                                September 30,    December 31,    September 30,
                                                    2002            2001             2001
                                                  --------        -------           -------
                                                                            
     Commercial/financial/agricultural.....       $ 42,750         79,722            57,913
     Real estate construction .............         76,036         65,052            65,341
     Real estate - mortgage ...............         53,858         47,180            43,925
     Real estate - other ..................        194,142        166,568           184,574
     Installment loans to individuals .....         17,094         17,793            22,822

                                                  --------        -------           -------
     Total loans ..........................        383,880        376,315           374,575

     less:
     Allowance for loan losses ............          7,297          7,348             6,531
                                                  --------        -------           -------
     Total net loans ......................       $376,583        368,967           368,044
                                                  ========        =======           =======


                                       12



Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

Provision and Allowance for Loan and Lease Losses

FLAG maintains an allowance for loan losses  appropriate  for the quality of the
loan  portfolio and  sufficient  to meet  anticipated  future loan losses.  FLAG
utilizes a  comprehensive  loan review and risk  identification  process and the
analysis of FLAG's  financial trends to determine the adequacy of the allowance.
Many factors are considered when evaluating the allowance. The analysis is based
on historical  loss trends;  trends in criticized  and  classified  loans in the
portfolio; trends in past due and non-accrual loans; trends in portfolio volume,
composition,  maturity,  and  concentrations;  changes  in  local  and  regional
economic  market   conditions;   the  accuracy  of  the  loan  review  and  risk
identification  system,  and the  experience,  ability,  and  depth  of  lending
personnel and management.

Management   evaluates  the  allowance  on  a  quarterly  basis.   Through  this
evaluation,   the  appropriate  provision  for  loan  losses  is  determined  by
considering the current allowance level, actual loan losses and loan recoveries.

The provision for loan losses for the third quarter of 2002 was $195,000  versus
$84,000 for  comparable  period in 2001. The allowance for loan and lease losses
at September 30, 2002 was $7.3 million,  approximately  the same as December 31,
2001.  The ratio of the  allowance for loan losses to net  outstanding  loans at
September 30, 2002 and December 31, 2001 was 1.94% and 1.99%, respectively.

The  following  table  summarizes  the changes in the  allowance for loan losses
arising from loans charged off and recoveries on loans previously charged off by
loan  category,  and  additions  to the  allowance  that  have been  charged  to
operations  in the  Company's  consolidated  statements  of  operations.  (000's
omitted)



                                                                       Nine months ended
                                                                         September 30,
                                                                         2002      2001
                                                                         ----      ----
                                                                               
     Balance of allowance for loan losses at beginning of period       $7,348        6,583

     Provision charged to operating expense                             4,399          588

     Charge offs:
        Commercial                                                        959          218
        Construction                                                       --           --
        Real estate - mortgage                                            469          359
        Real estate - other                                             3,221           45
        Consumer                                                          312          251
                                                                       ------       ------
           Total charge-offs                                            4,961          873

     Recoveries:
        Commercial                                                        120           83
        Construction                                                        1
        Real estate - mortgage                                             23           13
        Real estate - other                                               283          108
        Consumer                                                           84           29
                                                                       ------       ------
           Total recoveries                                               511          233

                                                                       ------       ------
           Net charge-offs                                              4,450          640
                                                                       ------       ------

     Balance of allowance for loan losses at end of period             $7,297        6,531
                                                                       ======       ======



                                       13



Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

Non-Performing Assets

Non-performing  assets  (nonaccrual  loans, real estate owned and repossessions)
totaled  approximately  $12.5  million at September  30, 2002  compared to $18.9
million at December  31, 2001 and $9.6  million at  September  30,  2001.  These
levels as a percentage of net loans  outstanding  represented  3.33%,  5.14% and
2.62%, respectively.

FLAG has a loan review  function that  continually  monitors  selected  accruing
loans for which  general  economic  conditions  or changes  within a  particular
industry  could  cause the  borrowers  financial  difficulties.  The loan review
function also identifies  loans with high degrees of credit or other risks.  The
focus of loan  review is to  maintain a low level of  non-performing  assets and
return current non-performing assets to earning status.




      Non-performing assets (000's omitted)             September 30,      December 31,    September 30,
                                                            2002               2001            2001
                                                          ---------         ---------       ---------
                                                                                    
     Loans on nonaccrual..............................    $   9,464            17,122           6,975
     Loans past due 90 days and still accruing........        2,084               594           1,367
     Other real estate owned..........................          989             1,231           1,303
                                                          ---------         ---------       ---------
     Total non-performing assets......................    $  12,537            18,947           9,645
                                                          =========         =========       =========
     Total non-performing assets as a percentage of
       net loans......................................        3.33%             5.14%           2.62%




Capital

At  September  30,  2002,  FLAG and its bank  were in  compliance  with  various
regulatory  capital  requirements  administered  by  Federal  and State  banking
agencies.  The  following is a table  representing  the  Company's  consolidated
Tier-1 Capital, Tangible Capital, and Risk-Based Capital:




                               September 30, 2002

---------------------------------------------------------------------------------------------------------------------
                                                    Actual                   Required              Excess
                                                    Amount        %          Amount       %        Amount       %
---------------------------------------------------------------------------------------------------------------------
                                                                                            
Total Capital (to Risk Weighted Assets)          $ 56,897      12.77%       $ 35,654    8.00%     $ 21,243    4.77%

Tier 1 Capital (to Risk Weighted Assets)         $ 51,286      11.51%       $ 17,827    4.00%     $ 33,459    7.51%

Tier 1 Capital (to Average Assets)               $ 51,286       9.49%       $ 21,627    4.00%     $ 29,659    5.49%




                                       14


Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

As of September 30, 2002,  there were no substantial  changes in the composition
of the Company's market-sensitive assets and liabilities or their related market
values from that  reported as of December 31, 2001.  The  foregoing  disclosures
related to the market risk of the Company should be read in conjunction with the
Company's  audited  consolidated   financial   statements,   related  notes  and
management's  discussion  and  analysis of  financial  condition  and results of
operations  for the year ended  December 31, 2001 included in the Company's 2001
Annual Report on Form 10-K.


Item 4.  Controls and Procedures

Within 90 days prior to the date of this  report,  the  Company  carried  out an
evaluation,  under the supervision and with the  participation  of the Company's
management,  including the Company's Chief Executive Officer and Chief Financial
Officer,  of the  effectiveness  of the design and  operation  of the  Company's
disclosure controls and procedures  pursuant to Exchange Act Rule 13a-14.  Based
upon that evaluation,  the Company's Chief Executive Officer and Chief Financial
Officer  concluded  that the Company's  disclosure  controls and  procedures are
effective  in timely  alerting  them to  material  information  relating  to the
Company  (including  its  consolidated  subsidiaries)  that  is  required  to be
included in the  Company's  periodic  filings with the  Securities  and Exchange
Commission.  There have been no  significant  changes in the Company's  internal
controls  or,  to  the  company's   knowledge,   in  other  factors  that  could
significantly  affect those internal controls subsequent to the date the Company
carried  out its  evaluation,  and there have been no  corrective  actions  with
respect to significant deficiencies or material weaknesses.


                                       15




Part 2. Other Information
FLAG Financial Corporation and Subsidiaries

--------------------------------------------------------------------------------

PART II.  Other Information

Item 1.  Legal Proceedings - None

Item 2.  Changes in Securities - None

Item 3.  Defaults upon Senior Securities - None

Item 4.  Submission of Matters to a Vote of Security Holders - None

Item 5.  Other Information

Pursuant to Rule 14a-14(c)(1)  promulgated under the Securities  Exchange Act of
1934, as amended,  shareholders desiring to present a proposal for consideration
at the Company's 2003 Annual Meeting of Shareholders  must notify the Company in
writing to the  Secretary  of the Company,  at Eagle's  Landing,  235  Corporate
Center  Drive,  Stockbridge,  Georgia  30281 of the contents of such proposal no
later than  December  15,  2002 to be included  in the 2003 Proxy  Materials.  A
shareholder  must notify the Company  before  January 15, 2003 of a proposal for
the 2003 Annual  Meeting that the  shareholder  intends to present other than by
inclusion in the Company's proxy material.  If the Company does not receive such
notice prior to January 15, 2003,  proxies  solicited by the  management  of the
Company will confer  discretionary  authority upon the management of the Company
to vote upon any such matter.

Item 6.    Exhibits and Report on Form 8-K

           (a)    Exhibits

           99.1   Certification by Chief Executive Officer and Chief Financial
                  Officer.


           (b)   Reports on Form 8-K

         Reports on Form 8-K filed during the Third Quarter of 2002:

         None


                                       16




FLAG Financial Corporation and Subsidiaries

--------------------------------------------------------------------------------




                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                          FLAG Financial Corporation

                                          By: /s/ Joseph W Evans
                                              ---------------------------
                                              Joseph W. Evans
                                              (Chief Executive Officer)

                                          Date: 11/12/02
                                                -------------------------

                                          By: /s/ J. Daniel Speight, Jr.
                                             ----------------------------
                                             J. Daniel Speight, Jr.
                                             (Chief Financial Officer)

                                          Date:  11/12/02
                                                 ------------------------



                                       17



                                  Certification


I, Joseph W.  Evans,  Chief  Executive  Officer of FLAG  Financial  Corporation,
certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q of FLAG  Financial
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The registrant's  other certifying  officer(s) and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:  November 12, 2002

                                                       /s/ Joseph W. Evans
                                                       ------------------------
                                                       Joseph W. Evans
                                                       Chief Executive Officer


                                       18


                                  Certification


I,  J.  Daniel  Speight,   Jr.,  Chief  Financial   Officer  of  FLAG  Financial
Corporation, certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q of FLAG  Financial
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The registrant's  other certifying  officer(s) and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  November 12, 2002

                                                 /s/ J. Daniel Speight, Jr.
                                                 --------------------------
                                                 J. Daniel Speight, Jr.
                                                 Chief Financial Officer



                                       19